Wednesday, May 09, 2007

Intellectual property

James Surowiecky has an excellent article on how the US uses its trade treaties with other countries to force stronger IP laws down their throats. Among other things, he argues for a search for the right balance in IP rules (implying that the American rules are flawed):

Intellectual-property rules are clearly necessary to spur innovation: if every invention could be stolen, or every new drug immediately copied, few people would invest in innovation. But too much protection can strangle competition and can limit what economists call “incremental innovation”— innovations that build, in some way, on others. It also encourages companies to use patents as tools to keep competitors from entering new markets. Finally, it limits consumers’ access to valuable new products: without patents, we wouldn’t have many new drugs, but patents also drive prices of new drugs too high for many people in developing countries. The trick is to find the right balance, insuring that entrepreneurs and inventors get sufficient rewards while also maximizing the well-being of consumers.

History suggests that after a certain point tougher I.P. rules yield diminishing returns. Josh Lerner, a professor at Harvard Business School, looked at a hundred and fifty years of patenting, and found that strengthening patent laws had little effect on the number of innovations within a country. And, in the U.S., stronger patent protections for things like software have had little or no effect on the amount of innovation in the field. The benefits of stronger I.P. protection are even less convincing when it comes to copyright: there’s little evidence that writers and artists are made more productive or creative by the prospect of earning profits for seventy years after they die, and the historical record suggests only a tenuous connection between stronger I.P. laws and creative output.